1 Summary of significant accounting policies

Transcription

1 Notes to the consolidated annual financial statements 1 Summary of significant accounting policies Introduction The consolidated financial statements of the SWX Group have been prepared in accordance with the Swiss Accounting and Reporting Recommendations FER/ARR (Swiss GAAP), and using historic acquisition costs. Scope of consolidation Companies in which the SWX Swiss Exchange holds a majority of the share capital and voting rights, or in which it holds 50% of the voting rights and exerts a significant influence, are fully consolidated. The subsidiaries included within the scope of consolidation are listed under note 2. Associated companies, i. e. those in which the SWX Swiss Exchange owns between 20% and 50% of the share capital, are accounted for using the equity method. Holdings of less than 20% are stated at acquisition cost less valuation adjustments. Fixed assets Fixed assets are stated at acquisition or production cost less depreciation charged over the useful life of the assets, and using the straight-line method. The useful life is estimated to be as follows: IT hardware Leasehold improvements Equipment, fixtures and fittings Motor vehicles 3 years 5 7 years 3 years 3 years Investments in subsidiaries and loans Associated companies are consolidated in proportion to the percentage of capital owned. Other minority holdings are stated at cost, and loans at their nominal value. In the event of non-temporary impairment of an investment, a valuation adjustment is made. The net result of this position is included in the income statement under net financial income. Principles of consolidation The consolidated financial statements are based on the financial statements of the individual companies, which are drawn up at 31 December using uniform accounting policies. The equity is consolidated using the purchase method. Intragroup expenses and income, intragroup accounts receivable and liabilities, as well as unrealized gains on intragroup transactions have been eliminated. The figure for revenues corresponds to billings for services and products provided to third parties less sales taxes, deductions and allocations to provisions required by the articles of association, contracts or regulations. Revenues and earnings relating to services currently being provided are included to the extent to which the transaction has been completed. Currency translation Balance sheets of Group companies that are drawn up in a foreign currency are translated using year-end exchange rates, while their income statements are translated using average exchange rates for the year. Intangible assets Software which is purchased from or developed by a third party and costs more than CHF is capitalized and depreciated over no more than three years. Software produced by SWX itself is capitalized at production cost and depreciated over an estimated useful life of 5 8 years. Goodwill is depreciated over five years using the straightline method. Other intangible assets such as patents, trademarks and other rights are capitalized at their historical cost and amortized over their estimated useful life (but not more than ten years) using the straight-line method. The amortization is charged to the income statement. Accounts receivable The figure for accounts receivable corresponds to billings less necessary valuation adjustments. Securities Securities are carried at the lower of cost or market value. Revenue from this item is included in the income statement under net financial income. Siviriez, Siviriez; Caisse d Epargne du District de Cossonay, Cossonay; Caisse d Epargne du District de Courtelary, Courtelary; Caisse d Epargne du District de Vevey, Vevey 1; Caisse

2 Annual financial statements of the SWX Group for Scope of consolidation The following companies are fully consolidated: SWX Swiss Exchange, Zurich (parent company) share capital CHF New Soffex AG, Zurich (wholly owned) share capital CHF ; holds the registered trademark SOFFEX. EXFEED AG, Zurich (wholly owned) share capital CHF ; provides financial information services. SWX Swiss Exchange UK Ltd, London (wholly owned) share capital GBP 1. ; provides member support for SWX clients. Holdings in the following companies are accounted for using the equity method: Eurex Zürich AG, Zurich (formerly SOFFEX AG, Zurich) 50% stake; share capital CHF ; European derivatives exchange. Due to existing profit-sharing certificates, the stake in the capital of Eurex Zürich AG is calculated at 20%. STOXX Limited, Zurich (33% stake; previous year 25%) share capital CHF ; calculates and markets European index families. virt-x plc, London (38,9% stake) share capital GBP ; pan-european blue chip exchange. Börsen-Informations AG, Basel (33,3% stake) share capital CHF ; general promotional activities for the Basle financial marketplace, operates Financial Meeting Point in Basle. 3 Changes in the scope of consolidation The following changes were made in the scope of consolidation in 2002: STOXX Limited, Zurich: stake increased from 25% to 33%. Börsen-Informations AG, Basle: acquisition of 33.3% stake. d Epargne et de Prévoyance d Yverdon-les-Bains S.A., Yverdon-les-Bains; CAT Finance AG, Zürich; Cazenove & Co. Suisse SA, Genève; CBG Banca Privata Lugano SA, Lugano; CBG Compag-

3 Notes to the consolidated annual financial statements 4 Accounts receivable Accounts receivable for goods and services from third parties from related parties 0 0 Total accounts receivable for goods and services Other accounts receivable from third parties from related parties Total other accounts receivable Total accounts receivable The item Other accounts receivable includes a loan of CHF 52.4 million extended to SWX Holding Ltd to finance the cash offer for the acquisition of virt-x plc. SWX Holding Ltd is a wholly owned undertaking of the Swiss Stock Exchange (SWX Swiss Exchange Association) and does not fall within the scope of consolidation. 5 Prepaid expenses and accrued income Exchange fees for 4th quarter, information services Accrued exchange fees Accrued interest on securities Deferred income taxes constituting an asset Other prepaid expenses and accrued income Total The SWX Swiss Exchange has been subject to taxation since 1 January 2002, which is why deferred income tax for 2002 is shown for the first time. The accrued amount arises from the differences between the book values of individual company accounts and the values used for consolidation purposes. nie Bancaire Genève, Genève 11; Citation SA, Zürich; Citibank (Switzerland), Zürich; Citibank N.A., Zürich; Clariden Bank, Zürich; Commerzbank (Schweiz) AG, Zürich; Compagnie Bancaire

4 Annual financial statements of the SWX Group for Summary of fixed assets in CHF IT Leasehold Other Total 2002 Total 2001 hardware improvements Acquisition costs at Additions Disposals (0) (0) (0) (0) (21 453) Acquisition costs at Accumulated depreciation at 1.1. (64 491) (720) (3 328) (68 539) (51 921) Additions (20 055) (1 475) (7 514) (29 044) (38 071) Disposals Extraordinary depreciation (0) (8 656) (0) (8 656) (0) Accumulated depreciation at (84 546) (10 851) (10 842) ( ) (68 539) Net book value at Net book value at Based on the findings of an impairment test, the residual book value of CHF 8.7 million for ConventionPoint, which is capitalized under leasehold improvements, was fully depreciated at 31 December Investments in subsidiaries Eurex Zürich AG, Zurich STOXX Limited, Zurich virt-x plc, London Total The stake in STOXX Limited was increased by 8.3% to 33.33% in The goodwill of CHF 1.6 million included in the purchase price is carried in the balance sheet under Intangible assets. Espirito Santo SA, Lausanne; cosba private banking ag, Zürich; Credit du Lac S.A., Lugano; Crédit Lyonnais (Suisse) SA, Genève; Crédit Mutuel de la Vallée SA, Le Sentier; Credit Suisse

5 Notes to the consolidated annual financial statements 8 Summary of intangible assets in CHF Goodwill Software- Externally Internally Total 2002 Total 2001 licences developed developed software software Acquisition costs at Additions Disposals (0) (0) (0) (0) (0) (6 646) Reclassification (6 988) Acquisition costs at Accumulated amortization at 1.1. (0) (8 385) (7 054) (1 160) (16 599) (6 886) Additions (320) (1 528) (11 181) (1 160) (14 189) (9 713) Disposals Accumulated amortization at (320) (9 913) (18 235) (2 320) (30 788) (16 599) Net book value at Net book value at Software licences have been capitalized since Externally developed software consists of extended functionalities designed by third parties for the Eurex system. The figure for internally developed software refers to development costs for extending the SWX platform, which have been capitalized since the 2001 financial year. In accordance with inhouse regulations on the capitalization of internally developed software, expenditure incurred in each financial year is capitalized at yearend and written off over an estimated useful life of 5 8 years. Fides, Zürich; CREDIT SUISSE FIRST BOSTON (Europe) Ltd., London; Credito Privato Commerciale SA, Lugano 4; Daiwa Securities SMBC Europe Limited, London, Geneva Branch, Genève; DC

6 Annual financial statements of the SWX Group for Other liabilities Due for goods and services to third parties to related parties 0 0 Total due for goods and services Miscellaneous liabilities to third parties to related parties Total miscellaneous liabilities Total other liabilities Accrued expenses and deferred income Social security Staff welfare fund Stamp tax Other accruals and deferrals Total This position includes an allocation of CHF 8 million by the Board of Directors to the staff welfare fund. Bank Deposito-Cassa der Stadt Bern, Bern; Decova S.A., Genève; Deka (Swiss) Privatbank AG, Zürich; Delen (Suisse) SA, Genève 11; Dominick Company AG, Privatbank, Zürich; Dresdner Bank

7 Notes to the consolidated annual financial statements 11 Provisions Retirement benefits 233 Staff holidays and overtime Swiss Federal Banking Commission Provisions for comfort letter Deferred income taxes constituting a liability 939 Provisions for taxes Miscellaneous provisions Total Pursuant to the ordinance concerning fees of the Swiss Federal Banking Commission, part of the Commission s costs are covered by a turnover fee levied by the SWX Swiss Exchange on securities trading. The amount payable to the Commission for the 2002 financial year is CHF 8.4 million. The SWX Swiss Exchange has committed itself in a comfort letter to providing Eurex Clearing AG, Frankfurt, with 20% of the financial resources it needs to fulfil its obligations as a clearing house. The provisions of CHF 13 million cover any risks that may arise from this comfort letter. As the SWX Swiss Exchange became liable to tax with effect from 1 January 2002, provisions for taxes amounting to CHF 5.7 million were set aside for the first time at 31 December The item Miscellaneous provisions relates, inter alia, to business risks for which definite figures are not yet available. 12 Solidarity fund At Deposits and contributions Interest Total solidarity fund Pursuant to the solidarity fund s rules and regulations, CHF per rightful claimant is to be paid into the fund from the securities turnover fee each year until the fund reaches CHF 10 million. This figure was reached at the end of The deposits and contributions registered in 2002 resulted from payments of fines imposed by the Disciplinary Commission which are allocated to the solidarity fund. (Schweiz) AG, Zürich; DTS DERIVATIVE TRADING SYSTEM AG, Zug; EB Entlebucher Bank, Schüpfheim; EFG Bank European Financial Group, Genève 2; EFG Private Bank SA, Zürich; Ersparnisanstalt

8 Annual financial statements of the SWX Group for Changes in equity in CHF Members Share Retained Profit for Total 2002 Total 2001 equity capital earnings the year At Deferred taxes at Conversion of association to joint-stock company (6 906) (3 094) 0 Profit for the year At With retroactive effect from 1 January 2002, the Swiss Stock Exchange Association changed its name to the SWX Swiss Exchange (entry in the registry of companies on 17 May 2002) and adopted the legal form of a joint- stock company. The share capital of the new company amounts to CHF 10 million, divided into registered shares of CHF 10 each. As the SWX Swiss Exchange became subject to taxation with retroactive effect from 1 January 2002, deferred income taxes were computed for the first time at 31 December The deferred taxes of CHF 10.2 million calculated on the initial positions at 1 January 2002 were treated as neutral in terms of their impact on profits. 14 Segment data Spot securities trading Derivatives trading (Eurex Group) Information services Admission fees Revenue from service level agreements Miscellaneous revenue Total revenue Revenue from spot securities trading declined due to the transfer of SMI blue chip stocks to virt-x plc as of 25 June The SWX Swiss Exchange is compensated for this migration of turnover with income generated through provision of services. This income is shown under Revenue from service level agreements. Revenues from derivatives trading again showed a positive trend and Eurex successfully maintained its position as the world s leading derivatives exchange with the largest volume of traded contracts. Miscellaneous revenue relates primarily to IT services provided for participants, investment protection fees and stamp taxes on the issuance of securities. der Stadt St. Gallen, St. Gallen; Ersparnisanstalt Oberuzwil, Oberuzwil; Ersparnisgesellschaft Küttigen, Küttigen; Ersparniskasse Affoltern i.e., Affoltern i.e.; Ersparniskasse des Amts-

9 Notes to the consolidated annual financial statements 15 Personnel expense Compensation (58 012) (46 104) Employee benefits (19 390) (18 002) Other personnel costs (13 056) (4 436) Total (90 458) (68 542) The item Other personnel costs includes a provision of CHF 8 million for welfare purposes. In 2002, an average of 428 employees occupied permanent positions (375 in the previous year). There were 429 full-time employees at 31 December 2002 (414). 16 Other operating expenses Repairs and maintenance (17 854) (19 014) Public relations and marketing (5 199) (16 311) Telecommunications (16 595) (18 943) Rental and leasing expense (7 658) (7 194) Turnover fee payments to the Swiss Federal Banking Commission, solidarity fund contributions (8 370) (9 914) Agency agreement with Eurex (40 024) (41 905) Consultancy and services (33 921) (33 972) Miscellaneous operating expenses (19 635) Total ( ) ( ) The decline in PR and marketing expenses is due to the fact that the extraordinary costs incurred in 2001 for the Transparency in Fund Markets (TIF) product segment did not arise last year. For the first time, fees for external consultants are carried under the new sub-heading Consultancy and services. In previous years, these fees were shown as part of personnel expense. The figures for the previous year have been restated accordingly. The item Miscellaneous operating expenses includes a provision of CHF 13 million for possible risks arising from the comfort letter in favour of Eurex Clearing AG, Frankfurt. bezirks Interlaken, Interlaken; Ersparniskasse Erlinsbach, Erlinsbach; Ersparniskasse Rüeggisberg, Rüeggisberg; Ersparniskasse Schaffhausen, Schaffhausen; F. van Lanschot Bankiers

10 Annual financial statements of the SWX Group for Net financial income Interest income Dividend income Financial income Interest expense (313) (537) Bad debt expense (132) (1 262) Stamp tax on creation of joint-stock company (2 562) Other financial expense (157) (41) Financial expense (3 164) (1 840) Income from unconsolidated holdings Exchange differences (945) (1 265) Valuation and exchange differences Total Dividend income for 2002 includes a dividend payment of CHF 1 million by STOXX Limited for the 2001 financial year. 18 Other expense/revenue Disposal of software (Eurex CBOT) (6 646) Miscellaneous expenses (2 017) (82) Other expense (2 017) (6 728) Reimbursement of VAT for previous years Eurex share of FBC turnover fees for previous years Reversals of provisions Other prior-period adjustments Other revenue Total Miscellaneous expenses comprise a provision of CHF 2 million set aside for the dismantling of leasehold improvements. (Schweiz) AG, Zürich; Ferrier Lullin & Cie SA, Genève 3; Fibi Bank (Schweiz) AG, Zürich; FIDEURAM Bank (Suisse) SA, Lugano; FIDURHONE S.A., Genève 3; Financière Mermod S.A., Lausanne;

11 Notes to the consolidated annual financial statements 19 Taxes Capital and income taxes (7 505) (88) Deferred income taxes (6 684) Total tax expense (14 189) (88) The SWX Swiss Exchange became subject to taxation with retroactive effect from 1 January Provisions for capital and income taxes were therefore established for the first time at 31 December The item Deferred income taxes is calculated on the differences between the book values of individual company accounts and the values used for consolidation purposes. A tax rate of 30% was applied for the calculation of deferred income taxes. 20 Off-balance-sheet transactions The SWX Swiss Exchange has committed itself in a comfort letter to providing Eurex Clearing AG, Frankfurt, with 20% of the financial resources it needs to fulfil its obligations as a clearing house. Provisions of CHF 13 million were established to cover any risks that may arise from this comfort letter. Long-term rental contracts exist with: The Canton of Zurich, for the stock exchange building located at Selnaustrasse (expiry 2012) Canary Wharf Management Ltd., Canary Wharf, London (expiry 2005) 21 Pending transactions The risks inherent in pending transactions are covered by Miscellaneous provisions. 22 Post-balance-sheet events On 10 January 2003, SWX Holding Ltd submitted a public takeover offer for all the shares of virt-x plc, a company listed on the Alternate Investment Market (AIM) in London. The offer provided for a price of 12.5 pence per share. Compared with the closing price of 6 pence per share on 18 December 2002 the last-paid price before the takeover bid was announced this represents a premium of around 108%. Compared with the average market price during the 30 days preceding the offer, the premium is about 64%. Financière SBA (Suisse) SA, Genève 3; Finter Bank Zürich, Zürich; First Zürich Private Bank AG, Zürich; FTI Banque Fiduciary Trust, Genève; 15 GESFID SA, Lugano; Glarner Kantonalbank,

12 Annual financial statements of the SWX Group for By 31 January 2003, the first closing day for the offer, SWX Holding Ltd had received 91.5% of the shares it wished to purchase. The takeover has therefore been completed successfully. The total value of the transaction is approximately CHF 52 million and includes goodwill. The latter is not supported by the current operating earnings of virt-x plc. SWX Holding Ltd is a newly established, unconsolidated company. 23 Related parties In the course of normal business operations, the SWX Group provides services for the following related parties: Eurex Zürich AG, Zurich STOXX Limited, Zurich virt-x plc, London Derivatives trading, Eurex Group Service level agreements, Eurex Zürich AG Service level agreements, STOXX Ltd Service level agreements, virt-x plc Agency agreement, Eurex Zürich AG (40 024) (41 905) Total The services are billed on an arm s length basis. 24 Staff pension fund There is an affiliation with a collective insurance foundation that insures the employees of the SWX Swiss Exchange and Eurex Zürich AG. In order to show pension fund liabilities as required by Swiss GAAP (FER/ARR 16), this affiliation is treated as a defined contributions plan, i. e. its assets and liabilities are not carried in the balance sheet, and the portion of personnel expense accounted for by the employer s contributions CHF 7.6 million, against CHF 6.2 million in 2001 equals the booked expense. Reserves for the employer s contributions amounted to CHF 3.7 million at 31 December An amount of CHF 8 million was fixed for discretionary payments and the financing of retirement benefits in the year under review. This amount was charged to Personnel expense and is considered as a reserve for the employer s contributions. It was accounted for on the balance sheet date under accrued expenses and deferred income. Glarus; Gonet & Cie, Banquiers, Genève 11; Graubündner Kantonalbank, Chur; GRB Glarner Regionalbank, Schwanden; Habib Bank AG Zürich, Zürich; Hardcastle Trading AG, Rapperswil